Bitcoin breaks $85,000, hitting an eight-month high: Legislative setback ironically becomes a catalyst, funds flow back from AI to crypto.

Bitcoin surged past $85,000, hitting an eight-month high. Despite setbacks in US crypto regulatory legislation, digital assets not only avoided continued pressure but also quickly recovered lost ground. Bitwise's Chief Investment Officer, Hougan, thus declared the "crypto winter" over and the market entering a "crypto spring."

Hougan has definitively concluded that the nearly year-long "crypto winter" has ended and predicts that this could become the strongest and longest bull market in cryptocurrency history.

Bitcoin has risen more than 7% in the past five days and nearly 35% in the past three months. From a technical perspective, BTIG analysts believe that as long as the support level around $75,000 holds, the bulls can push further towards the $90,000 area.

This rebound occurred against the backdrop of the Digital Asset Markets Clarity Act failing to pass the Senate procedural vote, breaking the simplistic logic that "legislative failure is bad news," and the market began to reassess the real impact of regulatory uncertainty.

The legislative setback did not stop the backlash

As Wall Street Insights noted , last week, the "Clarity of Digital Asset Markets Act" failed to reach the 60-vote threshold required for advancement in the Senate procedural vote, with 49 votes in favor and 50 against.

The bill aims to establish a more comprehensive regulatory framework for the U.S. digital asset market and clarify the regulatory division of labor between the U.S. Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC). It is regarded by the crypto industry as one of the most important regulatory legislations in recent years.

Disagreements over issues such as conflicts of interest among government officials, stablecoin rewards, and the impact on the banking sector were the main points of contention in the negotiations. Following the announcement of the vote results, Bitcoin and some crypto-related stocks initially fell but subsequently rebounded quickly.

Hougan believes that even if the Clarity Act fails to pass, the SEC and CFTC can still rely on their existing powers to formulate rules in the short term, and the failure of legislation does not necessarily mean that the regulatory environment will deteriorate.

Strategy Executive Chairman Michael Saylor also called the setback of the bill a "positive turning point" for the digital asset industry, believing that instead of accepting restrictions that may be entrenched in the long term, the industry should take advantage of the existing regulatory framework to fight for more favorable rules. The more important task in the next two years is to expand the scale of practical application of digital financial products.

Funds flowing back into AI: The core logic of the crypto spring

Hougan's core basis for judging that the "crypto winter" is over is not simply a price rebound, but the divergence between price and fundamentals.

He pointed out that while the price of crypto assets has fallen over the past period, the industry's fundamentals have not deteriorated accordingly: transaction activity on the blockchain has increased, and large financial institutions such as BlackRock have further participated in the digital asset market, forming a pattern of "cyclical price decline and structural improvement in fundamentals".

He anticipates that crypto asset prices may catch up further with fundamental changes later this year.

More noteworthy is the shift in fund flows. Hougan stated that investors are rotating back from AI stocks to cryptocurrencies. He added that the previous AI craze "virtually stole all the market's attention. Any investor chasing momentum focused on AI. Now, as the AI rally has stabilized somewhat, we're starting to see funds flowing back into the cryptocurrency market."

If this assessment holds true, it means that the driving factor behind Bitcoin's current rebound has shifted from simple risk aversion or policy expectations to a broader rebalancing of asset allocation, and the decline in AI trading congestion has provided a source of incremental funds for crypto assets.

The $90,000 mark becomes the next point of observation.

Looking at a longer timeframe, Bitcoin has not yet fully recovered from its previous correction.

Bitcoin reached an all-time high of approximately $126,000 in October of last year, before halving in value and falling to a low of approximately $57,600 in early July of this year. Even with the recent significant rebound, the current price is still about one-third lower than its all-time high.

This means the current rebound is more akin to a recovery from a deep correction than a confirmation of the start of a new round of historical highs. Analysts believe that whether $90,000 can be effectively breached will be a key indicator of the strength of the "crypto spring."

If prices encounter resistance and fall back around $90,000, the market may need to reassess the sustainability of fund rotation.If the price breaks out with high volume, it will further reinforce Hougan's assessment that this is "the strongest and longest-lasting bull market in history."

Going forward, attention should be paid to the Federal Reserve's interest rate path and the trend of long-term US Treasury yields, as these remain the core macroeconomic variables affecting the valuation of crypto assets.

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